Feeding the Beast: Do Top Art Museums Have an Unsustainable Funding Model?

What was the effect of the Great Recession in the nonprofit arts world? The answer depends on a litany of intermingling factors.

Large organizations in regions like New York City and Texas, for example, have rebounded quite nicely. As we've noted elsewhere, high-profile arts and cultural institutions in the Big Apple are experiencing a massive building boom. The New York Times reviewed the dozen or so ongoing arts-related projects in the city and came up with an estimated price tag of a cool $3.47 billion.

But what if you're a small-to-midsize, minority-focused arts organization outside affluent demographic areas? Well, there, the prognosis is more muted. A recent report by the University of Maryland's DeVos Institute of Arts Management suggests these groups avoid new capital expenses and instead focus on programming excellence. They should also de-emphasize landing huge checks from mega-donors and instead broaden their overall donor bases.

Then there's the museum world. Has this sector recovered from the Great Recession? For the country's largest museums, the short answer is yes, but moving forward, fundraisers will need to adapt to an altered and fast-moving landscape.

Let's first look at the recovery. According to Foundation Source, as of a year ago, the top art institutions in the country found themselves collectively sitting on $23.1 billion in assets, close to the pre-recession level of 2008. The total assets of half the country's wealthiest museums were near pre-recession highs; the other half eclipsed their previous high mark. So what accounts for this rally?

First, most obviously, the rebounding stock market. Secondly, necessary cost-cutting measures. For example, New York’s Metropolitan Museum of Art cut 14 percent of its staff and closed more than a dozen of its satellite gift shops in 2009. Third, many museums added seats to their boards to provide greater access to cash. Todd Levin, director of the New York–based Levin Art Group, says, "Adding to boards means that, to a certain extent, more money is going to be available to the institution and that these institutions are in a competitive field with one another." (Access to the MoMA's board, for example, requires a $10 million check.)

So that's the good news. Now comes the challenging news.

Specifically, most of the large museums profiled by the Foundation Source have been bitten by the "Bilbao Effect" bug—the idea that an architecturally exciting project makes an institution more of a destination.

On the bright side, donors positively respond to a fundraising campaign that points to tangible capital improvements—new buildings, gardens, renovations, etc. But raising the groundbreaking funds is one thing; amassing the millions to pay for ongoing maintenance is another thing altogether. And so the price tags for many of these projects tend to grow exponentially over time, further straining funds.

Then there's the disproportionate influence of the mega-donor. William Eiland, director of the Georgia Museum of Art, notes, "We have fewer sources and less-predictable sources of income, and more and more museums are reporting this." This means museums are increasingly reliant on that huge check from a demanding, show-me-the-ROI donor. 

The confluence of these factors creates a vicious "Feed the Beast" cycle. Museums feel compelled to get bigger to keep up with their competitors, creating an insatiable—and arguably, unsustainable—need for financing.

Yet there are examples of museums that have escaped this cycle. Take the Worcester Art Museum (WAM), for example. WAM’s director of philanthropy, Nora Maroulis, told IP that hunting "big game" isn't the top priority for WAM's development operation. In fact, WAM's experience suggests that if large museums want to escape this cycle mentality, they'll need to look—ironically enough—to the practices of their smaller counterparts.

Smaller arts institutions, like the Hammer Museum in UCLA, are offering discounted or free admission or free membership to establish engagements that can turn into new funding sources down the road. Large museums can also follow DeVos' advice to smaller organizations and double down on programming. 

And therein lies the irony. If the Great Recession taught us anything, it's that reliance on a funding or investment model predicated on voracious income accumulation can be unsustainable and destructive. Bigger isn't better. Massive is even worse. Yet, six years after the crash, many large art museums, despite flush endowments and ambitious new building projects, run the risk of getting sucked back into a precarious "Feed the Beast" vortex.

Will they adapt in time before the next downturn hits?